December 11, 2008: Morning Call

December 11, 2008: Morning Call

Fair Value: SP500 – 899.12; NDX: 1222.87; DOW – 8763.17


Technical Levels:

SPX: 685, 752-755, 848-852 support/ 899-908, 998-1002 resistance


Events:

Pre-market EPS: CIEN (.05/198.3M); COST (.62/16.81B); GIL (.44/341.5M)
04:00: ECB Publishes December Monthly Report
04:30: Bank of England Quarterly Inflation Attitudes Survey
07:15: V presents at the Goldman Sachs Financial Services Conference
08:00: FWLT presents at KeyBanc Capital Markets Conference
08:30: US Trade Balance (October): -53.5B
08:30: Import Price Index (November): -4.0% MoM; -1.5% YoY
08:30: Initial Jobless Claims (December): 525,000; Cont. Claims: 4.02 million
10:30: NDAQ presents at the Goldman Sachs Financial Services Conference
10:35: EIA Natural Gas Storage
11:00: COST earnings call
11:15: COF presents at the Goldman Sachs Financial Services Conference
12:00: BLK presents at the Goldman Sachs Financial Services Conference
14:00: MDR presents at Keybanc Capital Markets Conference
14:30: CSCO presents at Barclays Tech Conference
21:00: Chinese Retail Sales (November): 20.7% YoY


Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 5 points below fair value while the NASDAQ futures are trading flat with fair value. Crude oil is trading 5% higher on hints that OPEC will cut production more than expected. The USD is also sharply lower against the Euro (down 1.6% to 1.3232), which is triggering a better bid to commodities. Asian markets closed mixed (Japan +0.70%, Hong Kong up 0.25%, Australia down 1.1%, Shanghai down 2.3%) on concerns about whether the auto bailout package would pass the Senate; the House approved the bill last night. European markets are flat in a quiet trading day. Energy and commodity stocks are among the leading gainers.


Impact Research Calls/Market Moving News:

BIDU (104.54): Baidu.com guides Q4 revenue to $131-133M vs prior $151-155M and Reuters $145.7M: The company noted that several factors contributed to the guidance revision. First, the economic slowdown in China is having a greater than expected impact on online marketing particularly in machinery and franchising; second, Baidu recently removed the paid search listings of customers in the medical and pharmaceutical sectors without licenses on file with Baidu; and third, after a thorough inspection of its customer base, the company removed a number of questionable paid search listings outside of the medical and pharmaceutical sectors. The company noted that a portion of its customers in the medical and pharmaceutical sectors have returned to its paid search listings following the submission of required licenses.

V (53.16): Visa expects to achieve f09 EPS, margin guidance, sees revenue growth at low end of +11-15% for 2009

PG (59.12): Procter & Gamble reaffirms Q2 EPS guidance of $1.58-1.63 and full year EPS $4.28-4.38

AIG (1.75): AIG unlikely to generate $15B worth of asset sales by year-end - Bloomberg

AXP (21.56); COF (32.08): Charge-offs Start to Shred Card Issuers – WSJ: "Card-industry executives are worried about escalating "roll rates," a term that refers to the percentage of cardholders who go from merely late on their payments to not making them at all. Among cardholders who are between 60 days and 89 days overdue, about 20% of such card balances eventually are being charged off by card issuers as uncollectible, according to Auriemma Consulting Group Inc., a Westbury, N.Y., financial-services consulting firm. The percentage is up by about a third from last year, before the U.S. economy tipped into recession. The problem can be even worse for bundles of outstanding credit-card balances that are securitized by some of the largest issuers. For example, American Express Co.'s roll rate worsened to 47% in the third quarter from 35% a year earlier, says investment bank Keefe, Bruyette & Woods Inc., which calculated the figures from securities filings. At Capital One Financial Corp., known for its cheeky ads and mass-market strategy, the roll rate has reached 34%, up from 28% in last year's third quarter. Those figures don't reflect credit-card loans that the issuers keep on their books. Card issuers are scrambling to reverse the trend, with moves that include cutting credit lines to some customers and contacting cardholders before they become delinquent. In a report last week, Meredith Whitney, a banking analyst at Oppenheimer & Co., estimated that card issuers will reduce credit lines by more than $2 trillion in the next 18 months."

Libya says supply cuts that were previously agreed to by OPEC members are not enough – Bloomberg. Saudi Arabia also indicated that that they pumped 287,000 barrels a day less than estimated by the IEA. The comments from Libya and Saudi Arabia suggest that OPEC will cut production for a second time when it meets next week in Algeria.

COST (53.69): Costco reports Q1 EPS $0.65 ex-items vs Reuters $0.62:Company reports revenues of $16.39B vs Reuters $16.59B. Q1 same store sales were +1%; US +3% and International (7%). On a local currency basis, international comparable store sales increased +7% in Q1.

Paul Volcker being pushed for Car Czar - WSJ: A person close to Volcker says that he would "probably" fill the role with enough persuasion, but no one has asked him yet, and he doesn't actually want to do it. The current and incoming administrations are working together, meaning the White House may look to strengthen criteria that carmakers would need to meet to qualify for federal help. The article says the need for an experienced figure in the position increases Volcker's chances and diminishes others', specifically those of Kenneth Feinberg. A person familiar with the matter at General Motors says the company would have no problem with his appointment